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DingoesAteMyBaby

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  1. Thank you Don and Vern for your replies. The contract type in each case is a labor hours IDIQ contract where the rates are fixed in the base contract and task orders are issued at a Firm-Fixed-Price to complete the Statement of Work. So this clause is intended to control how the fixed rates escalate each year. Clearly this clause would not translate well to other contract types. As far as FAR 17.207(f) is concerned, this was considered when crafting the contract language. The contract's option periods are a part of the contract as solicited, as is the clause which affords for the rate determining methodology. In terms of unbiased evaluation and the basis for award to the particular offeror, this was a Brooks-Act selection for a series of A-E contracts. I could see how this could be very problematic if it were used on a contract that was competitively awarded under FAR Part 15's best value continuum, tradeoff process. But for a sole-source contract, which is the negotiating environment that you end up in when negotiating price and rates under an A-E, then really there is no change to the scope in terms of Part 6 and CICA. This clause was crafted with a focus on FAR 17.207(d) and being able to make a determination that 5% escalation could be fair and reasonable given that the industry only typically encountered 1% - 2% annual PPI increase. edited to add: This could amount to increasing amounts of undue profit each year, reasonably up to 8% if the PPI trajectory is in a straight line in the outyears. Don, as far as clause control - the agency is a civilian agency and the policy arm did not seem to take issue with the crafting of clauses out in the field. Although the agency certainly should have an internal control to manage such clauses.
  2. A couple of years ago I encountered an issue with sole-source contracting for a series of requirements where the offerors each proposed an annual escalation rate of 5% for his / her contract. Try as I might I couldn't get the offerors to budge on the escalation rates, and thus negotiations languished because given the economy there was no chance I would accept 5% escalation. So I offered an alternative. Either reduce the annual escalation rate to 2% or accept the a clause which would automatically set the annual escalation rate tied to the BLS index for the industry code. In all but one case, the offerors accepted the 2%. In no way do I claim that the clause was perfect, but thought I would share because I truly believe that the clause did save the Government money in a fair manner. If anyone has any ideas how to make this type of clause better I welcome your feedback. H.XX ANNUAL ESCALATION ADJUSTMENT ( a ) This clause applies to the labor category contract line items appearing in the Pricing Schedule. This clause shall be applied unilaterally by the Contracting Officer in order to arrive at the annual escalation rate to be incorporated at the time of option exercise. ( b ) The Contractor warrants that the prices in this contract do not include any allowance for any contingency to cover increased costs for which adjustment is provided under this clause. ( c ) The fixed hourly labor rates will be adjusted to reflect the actual market indicator increase or decrease in the U.S. Department of Labor Bureau of Labor Statistics (BLS) "Architectural, engineering and related services" Industry Index (Industry Code 5413) as it appears in the BLS publication Producer Price Indexes for the Net Output of Selected Industries and Their Products, Not Seasonally Adjusted which is available at http://www.bls.gov/web/ppi/ppitable05.pdf. In the event that the U.S. Department of Labor Bureau of Labor Statistics discontinues publication of this index an appropriate substitute index will be incorporated into the contract by mutual agreement of the parties. ( d ) Any adjustment will be limited to increases or decreases in the index as described in paragraph ( c ) of this clause, but shall not otherwise include any other adjusted amounts for general and administrative costs, overhead, or profit. ( e ) The Contracting Officer will include with the preliminary written intent to exercise the option period, the escalation adjustment rate based upon the percent index change from June of the previous year to June of the current year. ( f ) During any contract period within which an adjustment to the contract line item prices, as either an increase or decrease, will be made under the authority of this clause, the increase or decrease shall not exceed seven (7) percent of the contract unit prices in effect during the preceding contract period. (End of Clause)
  3. At NAVSEA the standard is "…business clearance must be approved at least one management level above the person conducting negotiations". Through implementation this means the person above who is a "Supervisory Contract Specialist". This does not mean a senior Contracting Officer who is serving in a team lead capacity since in reality the team lead function is a made up function whether it appears on an organizational chart or not. There is no OPM job title in the GS-1102 classification for "Contract Specialist Team Lead", therefore there is not a unique PD for such a role, and often times the team lead could be a bargaining unit employee and part of a union...all of which are not managers. Absent the NAVSEA standard, I would normally view a team lead as the level above, and have served in such a capacity a number of times in my former life as a team lead. That is assuming that the team leads are empowered by the organization to hold firm on the policies and regulation being enforced by the team lead, which has been my experience 80% of the time. But most properly, the supervisor should be engaged in the work that is taking place, perhaps at an appropriate threshold depending on the contracting activity, and should review certain works prior to the contract specialist / contracting officer moving forward. It's a basic internal control mechanism. So I guess it just depends on how your organization is arranged. The result of a meaningful internal control of this type is to ensure that quality is built into the contract actions generated, that they are compliant with policies and regulations, and that ultimately the Government is obtaining its best value for the given action. If this is capable at the team lead level then so be it, if this is not capable at the team lead level, then the role should be completed by the supervisor.
  4. In the past I have found this Executive Order interesting, and have seen it come across my desk as a provision of solicitations. I always redline the Executive Order from the solicitation. Once the Department of Labor and the FAR Council have seen fit to insert a 52.222-xx clause, I will comply with its prescription. While this is one of those times that a Contracting Officer should consider what regulations or policies (or in this case Executive Orders) exist outside of the FAR which could affect the tailoring of a contract, until such time that the Department of Labor is willing to enforce the Executive Order it's really a moot issue. Aside from that, it creates an artificial control which would take away the business decision of offerors as to how they will staff the contract for which they are responsible for the performance. I am wary of telling a contractor who they will hire. Further, doing so serves to dillute the source selection process because this is yet one more area on a service contract where prospective offerors will not have an opportunity to differentiate themselves from their competition.
  5. So the terms and conditions that I mention are beyond the standard clauses which are included in the contract, such as 52.232-20. The CIF crossflow is managed by a Determination of Fee clause that states: Cost Incentive Fee Payable: The Cost Incentive Fee payable under this contract shall be the Target Fee increased by fifty (50) cents for every dollar that the total allowable cost is less than the Target Cost or decreased by fifty (50) cents for every dollar that the total allowable cost exceeds the Target Cost. In no event shall the Cost Incentive Fee be greater than six (6.0%) percent of Target Cost. Minimum Fee is zero percent (0.0%). And the Target Fee is defined by a provision of the same clause that states: Target Fee: As used in this contract, equals four percent (4.000%) and represents the fee initially negotiated on the assumption that this contract would be performed for a cost equal to the Target Cost or adjusted in accordance with paragraph ( c ) of this clause.
  6. wvanpup, Thank you for the thoughtful discussion. I can simply say that the cost sharing is defined within the terms and conditions of the contract to allow the crossflow of the funds to pay for overrun. That mechanism is merely administered by following an established process for its use. However, the process is absent an explanation of what to do should the Government crossflow the CIF into the overrun but elect not to fund the balance. You ask "what are we doing here if the contract is not terminated?" That is a good question and I should have been more clear by stating the fact that the limitation of cost letter was received after the completion of the work. So, like you said, the purpose is to afford the Government a decision point for whether to require the Contractor to continue with work by way of adding funds to the contract. - DAMB
  7. Vern, Thank you for your reply. I noted that the clauses did not use the word "should", although I believe it should. I guess my thought is, in the absence of a specific disallowance of the cost, does it remain allowable until such time that DCAA would conduct an audit of incurred costs? At some point some determination would need to be made, would it not. - DAMB
  8. The Cost Incentive Fee clause states that there is a 50/50 share line. So overruns are funded up to 8% of the target cost by using the CIF funds which are applied to the contract at 4% of the target cost, and the remainder by the Government. In this case, we read the clause as allowing the CIF funds to be shifted to pay for the overrun, but that the Government will not contribute the balance as the notice was not received timely. I'm not saying the contract vehicle makes a lot of sense, and is not cost-sharing as it is described in Cibinic and Nash Cost-Reimbursement Contracting, 3rd ed. But that's what the contract states. Thanks, - DAMB
  9. Question: In a situation where the following apply: 1) A CPIF contract contains the clause 52.232-20, Limitation of Cost; 2) The Contractor fails to submit a timely notification in writing when it has reason to believe that the total cost for the performance of the contract, exclusive of any fee, will be greater than had been previously estimated; 3) The Government has elected not to reimburse the Contractor for costs incurred in excess of, under this cost sharing contract, the estimated cost to the Government specified in the Schdule; 4) The Government has elected to reimburse the Contractor for costs up to, but not in excess of, the amount within the Cost Incentive Fee for costs incurred; Is the Contracting Officer required to issue a written notice of intent to the Contractor to disallow the specified costs incurred in excess of the estimated target cost, which are in excess of those funded by the Cost Incentive Fee. i.e., is the Contracting Officer required to disallow the costs associated with the "estimated cost to the Government specified in the Schedule", which the Government takes exception to? This, vice just simply taking exception to the costs and not funding the overrun on the basis of not receiving a timely written limitation of cost letter? If that's not clear, the situation is very akin to the situation found within the following court case; within this case the costs appear to have been formally disallowed: https://bulk.resource.org/courts.gov/c/F3/108/108.F3d.307.96-1028.html I'm just not certain as to whether the costs need to be formally disallowed or if the Government can just take an indefinite exception to the costs. Thank you in advance, - DAMB
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